The Housing Economy Experiences Gradual Growth

August 2, 2016

Harvard’s Joint Center for Housing Study Releases Important Data

With numerous housing reports coming out each month, many have debated what these new economic performance measurements will mean for the future of housing rates and for the building industry. According to Harvard’s The State of the Nation’s Housing 2016 report, new home sales are strengthening with a 6.39% increase to 5.3 million. Although these numbers may indicate that the housing economy is not back to where it once was, it does show that there is substantial improvement from recent years.

Major report findings:

Multifamily starts rose 11.8% to 397,300, the highest in 27 years. Single-family starts were also up, rising 10.5% to 715,000.

Sales of both new and existing homes are up. The existing homes inventory remains tight with a supply of 4.8 months.

The inventories of for-sale homes in the low and middle price tiers dropped 9% between 2014 and 2015, contributing to a total decline of 38% between 2010 and 2015.

The median price of existing homes rose 6.6% to $222,400. Rising home prices have contributed to a reduction in the number of homeowners with negative equity.

However, other issues have risen, specifically the cost burden for renters. According to the report, 36.4% of households in 2015 opted to rent, which is the highest numbers seen since the late 1960s. This stems from low-income rates, as well as millennials who still are deeply in debt with school. Many millennials say that they envision themselves purchasing a home of their own one day, but due to financial troubles do not see themselves buying a home in the near future.

The report also shows that US housing starts have risen more than excepted in June due to construction activity. Despite the rise in housing starts, data points show that there will be a leaner second quarter, especially with it being an election year. While we are still far away from a boom period in housing, the latest housing starts from Harvard’s Joint Center for Housing Study shows that we are on a gradual recovery path.

Key Takeaways:

Americans remain optimistic toward homeownership

Household growth is on the rise

Rental housing remains in high demand

New construction of single-family homes is on the rise

While the numbers show a gradual recovery, there’s still a lot of situations in which the housing economy may not reach the housing peak that it once was. Although, with those numbers being as unstable as they were, it’s possible that they may not be such a bad thing.